Shindo Isshin

Gree, Mixi innovators say Japan Web firms need global strategy
Japan doesn’t have the venture-capital culture that Silicon Valley has. Business funding in general is harder to obtain here than in the US. You often have to show that you’re committing significant money of your own to the business to get any money from a bank, and there’s much less of a chance of getting investors without showing that you’re able to contribute money of your own, and get a bank loan. Kind of a catch-22 situation, but that’s not surprising if you’ve been living in Japan for a while. What that means is that you’ll basically never see a Dot Com boom in Japan, on either mobile or wired networks. You basically start small and grow from there, or don’t even play the game.

One of the big problems Japanese companies face in trying to expand overseas is the inbred nature of the Japanese market. This is true in any of the domestic businesses, but especially true in technology. Companies tend to create their own standards, and do not create them with interoperability in mind. Sony is famous for creating a new standard (ATRAC, Betamax, DAT, SDDS, MemoryStick, UMD) alongside nearly every new piece of hardware they come out with, most of which fail to become widely accepted. This is standard practice for tech companies here, not just the usual big company stab at lock-in. Most—if not all of the tech companies I’m aware of—constantly try to create new standards whenever possible, or deliberately avoid the use of open standards, which amounts to the same thing.

For example, NTT DoCoMo created their own set of technologies to dig them out of the previous hole that creating their own set of technologies created. If that sounds recursive, it’s because it’ meant to. Japan is the only place in the world that uses PDC TDMA. NTT DoCoMo created it as an early mobile standard and didn’t give a crap about interoperation with North American or European systems. They repeated most of their mistakes with i-mode, though they did manage to sell some licenses to carriers in other countries on the strength of the monetization scheme.

DoCoMo created their own little internet ghetto—in the guise of gated community—based on their proprietary standards. The relative success of i-mode was due to good implementation of per-packet billing (i.e. milking money from customers) not necessarily on the superiority of the technology from an end-user or engineering standpoint. With competition from iPhone and other smart phones based on open standards, they’re back in the same place they started; with technology that cannot communicate with other networks without a specialized server in between. From a business standpoint, that’s great because you can charge your customers big yen and know that they don’t have any alternatives if they want the services or information. If you want to grow quickly, innovate, or even just make sure that your customers can send email to customers on another network’s system*, it’s shit.

Software engineers who make mobile applications get stuck learning proprietary licensed systems, because those are the only things they can use in the Japanese market. Handset manufacturers get stuck making hardware that can only be sold in Japan because it can’t be used anywhere else in the world. Companies who want to offer services on the closed networks the carriers create get stuck making sites that work only on one carrier, with no access to customers on another carrier without extra work and licensing fees, and no way to get traffic from the real internet as opposed to these virtual cul-de-sacs.

On the other hand, some of these services also don’t care about interoperability. Mixi and Gree, mentioned in the article, require a mobile phone to register. After that, you can access most of their services through a standard website. But they don’t work with the iPhone. They stuck with Japan-only technologies in verifying user ID, and they block non-Japanese IP addresses for registration. If these two companies were chosen as shining examples of services that might be able to make the jump to the overseas market, I think someone at the Japan Times screwed up.

One thing that is true: if Japanese mobile companies want to expand overseas, they’re probably going to have to start with that goal in mind. If they want to focus on the Japanese domestic market, very little of their technology will be applicable to any other market.

I disagree pretty strongly with the statement made early in the article, that you need to succeed in Japan before you can succeed elsewhere. If you succeed in the Japanese market, you’ve almost certainly grown in a way that makes you suited for nowhere else in the world. It’s island speciation writ in computer code. Adaptation to Japan might make you a giant rat here, and you might come up with some interesting new ideas, but if you try to bring those things overseas, you’ll revert to a smaller size of rat due to increased competition, or get laughed at because those flashy tail feathers that worked so well on the island don’t provide any advantage elsewhere.

*When I got my first mobile, a tiny DoCoMo clamshell with a color(!) screen back in 2001, I couldn’t send email to people on the competing Vodaphone network. They couldn’t send me mail either. Computer mail sometimes worked, usually didn’t, and often ended up as mojibake.

If you think that sounds ass-tastic, here’s another fun tidbit. DoCoMo came up with different implementations for encoding emoji in the Japanese and European versions of i-mode, so even other DoCoMo phones might display garbage instead of the character you were trying to send if you had friends in other countries.